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Case Study

23 Nov

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Case Study:
Overview
UDC is a regional transportation and distribution company in operation for over 60 years. The company
serves major cities in the Mid-Atlantic region. They are headquartered in Wilmington, Delaware and
have a staff of 400 employees including truck drivers. There are 6 distribution terminals (Philadelphia
PA, Baltimore MD, New York City, Washington DC, Newark NJ and Wilmington DE) for consolidating
freight, and 100 delivery vehicles including 20 tractor/semi-trailer units, 40 box trucks and 40 panel
vans.
The company operates in a highly competitive business environment. Growth has been stagnant
because of a slow economy. John, the president of the company, would like to see growth at 5% per
year. He would also like to see expenses cut by 5% to help fund new initiatives. Current revenue is about
$39 million a year with profit running at 4%.
To familiarize yourself with commonly-used shipping terms in the freight industry, visit this site and refer
to it as you read the case study and assignments:
http://www.shipnorthamerica.com/htmfiles/glossary/gloss_shipterms.html
Current Business Operations
UDC operates 24 hours a day, 7 days a week. Sales personnel (12 people, two per terminal) visit
prospective customers to outline company capability, services provided and costs. When a customer
decides to use UDC they call the dispatch office with shipment information. Usually they FAX a copy of
the bill (s) of lading to a terminal with information such as origin, destination, product description,
weight and number of packages.
A dispatcher at a terminal makes a list of freight pickups and sends a truck to get the freight. To do this
they use the routing system to determine the sequence of pickups by zip code. They use local maps
within a zip code to map out the specific order of pickups since there may be several in a zip code area.
They have a performance goal of 98% of freight picked up within 24 hours of availability.
A driver follows the dispatch order for pickups. Many of the drivers complain that the pickup order is not
efficient. When they pick up an order they sign for receipt and either load the freight or guide the
customer’s forklift operators to arrange it properly in the truck.
After freight is picked up it is brought to the terminal where it is unloaded and sorted by destination. A
dispatcher then prepares a delivery ticket (again using the routing system) that is used to load a truck in
the proper sequence for delivery. Some trucks take freight from one terminal to another while others
make local deliveries. About half of a terminal’s space is used on any given night. Dispatchers have a
goal to turn freight around in the terminal overnight for next day delivery.
When freight is sent out for delivery, the driver follows the delivery ticket order. Often they are held up
at a delivery destination by traffic or by lack of available unloading space. This can cause the driver to be
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late trying to make the day’s deliveries. Sometimes they get to a destination and the facility is closed
and they bring the freight back to the terminal for delivery the next day. It is unloaded and re-sorted by
destination. The dispatchers then add it to the next day’s delivery tickets.
The major freight volumes are between New York, Philadelphia and Baltimore (about 70% of total
volume). Trucks run at about 70% of capacity between terminals overall. Local delivery volume is
heaviest in New York, followed by Baltimore and then Philadelphia. Local delivery trucks operate at
about 80% full while pickups fill about half of the vehicles space. Some customers pick up and/or drop
freight at a terminal with their own equipment.
Truck drivers communicate with the dispatchers using two-way commercial radios. Some also carry
personal cell phones and use them if the radio is out of range. A few drivers also carry GPS devices to
help locate addresses. In general the drivers are content with the company. Pay and benefits are good
and they get overtime pay when deliveries run late. Complaints are few and mostly center around either
the sequence of pickup and delivery of shipments or vehicle maintenance.
The fleet is maintained at the main Wilmington maintenance shop and at a smaller shop in Washington.
Either one can handle minor maintenance and preventative work. Only Wilmington can perform major
engine and transmission work. Overall the fleet is in good operating condition. All vehicles are on a
preventative maintenance schedule which places them out of service two days a month, usually on
weekends. Maintenance scheduling is a challenge because it can interfere with the steady flow of
shipments both between terminals and for local delivery. There are no “extra” vehicles in the fleet.
Administration
The company management team consists of the President, Vice President of Operations, Chief Financial
Officer (CFO), Chief Information Officer (CIO), Sales Manager, and a Fleet Manager who is in charge of
maintenance and safety. They meet weekly to discuss opportunities and issues and to plan for the
future. Except for the CIO, the management team has been in place for many years
The president of the company just hired its first Chief Information Officer (CIO), Carol, after the previous
IT Director retired. She comes from a nearby manufacturer who is also a major customer. At that
company she was Deputy CIO and primarily responsible for network operations and security.
At a recent meeting the management team decided to change the strategic plan for the business in
order to meet growth and cost goals. They highlighted three new strategies they want to employ to
increase profitability and grow the business. First, they desire to provide warehousing services for
customers who want to reduce delivery time to their customers by having product available locally.
Second, they want to improve the percent of loaded miles in their fleet to reduce costs by coordinating
the pickup and delivery of freight at the same time in the same geographic area. Third, they want to
track the whereabouts of freight both in the terminals and on the trucks to provide customers with
accurate delivery dates and times.
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In addition, the management team wants to ensure that the company remains in compliance with all
applicable federal and state regulations. The ones they are most concerned about are: (1) the Sarbanes
Oxley financial audit and reporting requirements; (2) a new federal requirement to conduct a vehicle
safety check every 10,000; and (3) a Federal Motor Carrier Safety Administration (FMCSA) reporting
requirement on the number hours per day for each driver (or max per week, etc.). The CFO has been
charged with the overall project. He has asked Carol to help with this effort by modernizing information
systems to support the new strategies. She has decided her first step is to update the IT strategic plan to
link to the new strategies in the corporate plan. Second, she wants to engage her customers in a
proactive way to first, identify and prioritize IT projects that will help meet the new goals, and then
develop a set of requirements for each project. Third, she wants to decide on the best approach to
modernize the information systems that will meet requirements at a reasonable cost, and for this she
will need to make some changes to the IT organization.
Technology
UDC is using a mix of older technology products for finance and accounting, route optimization, freight
tracking and fleet maintenance. There are several projects already in the IT portfolio competing for
resources. The CIO sees a major challenge in balancing available funding, IT staff workload and project
prioritization. The project nearest completion is the adoption of the Accurate Financials System to
replace the aging finance and accounting system. It will be completed in six months. There are two other
projects under way, one for management reporting and one for a mobile application that sales staff can
use to show potential customers information on the fleet, distribution services available and freight
rates, including a comparison to the competition.
The route optimization and freight tracking system is very important to the operations manager and
dispatchers. The current system allows the input of freight origin and destination information. This is
taken from a bill of lading which contains a plethora of specific information. When the dispatchers enter
the origins and destinations into the system they are grouped by zip code. The dispatchers then decide
which zip codes will be loaded in a truck and in what sequence for delivery. This takes several hours at
night to accomplish and must be done as quickly as possible so trucks can be loaded and sent out in the
morning for delivery. Arranging shipment sequence within a zip code is done by locating each address
on a map and entering it into the system in the best order. Pickups are handled in a similar manner.
The fleet maintenance system contains information on each vehicle in the fleet. It includes all vehicle
specifications, a summary of all repairs, a preventive maintenance schedule and an inventory of parts on
hand. This information is entered by accounting clerks, mechanics, purchasing clerks and anyone else
who has time to do data entry. It is not as time consuming as the routing system but it contains
information critical to fleet reliability. The greatest challenge is scheduling preventative maintenance
since it requires vehicles to be down for two days. The dispatchers do not want the equipment taken out
of service because it causes planning headaches. The relationship between dispatchers and
maintenance personnel is strained.
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IT Organization
When Carol was hired as CIO last month she took a close look at the current staffing. The IT staff consists
of 22 people, seven of whom are programmers. The programmers are charged with all systems
development and integration work for the company. They have three projects in their current portfolio.
Their skill sets include SQL, .Net and C+ programming, and Web design.
There are six helpdesk personnel who support the six distribution terminals (one at each terminal). The
remaining staff includes 2 network engineers, a financial systems specialist (an expert in Accurate
Financials), a computer security expert, two shift supervisors and the CIO and her two personal
assistants.
The IT staff supports multiple locations. At the Wilmington headquarters/terminal there are 15 servers
(they contain all software and data; one stores a backup copy of the data) and 30 PCs for accounting,
marketing, IT, administration and management. The terminal operations office has 5 PCs for dispatchers,
one for the maintenance office, one for parts and one for drivers in the driver lounge. The other 5
terminals have 10 PCs each and connect to headquarters by a virtual private network (VPN).
IT Portfolio
Accurate Financials- This new system will replace the current finance and accounting system. It is an offthe-
shelf product that requires the owner to make modifications to interface with other systems they
may own. Two programmers are working on the project. One is setting up the database and loading the
software on servers. The other is learning about the system in order to write an interface with the
routing system. A representative of Accurate will train the accounting staff in its use. This will take about
two weeks.
Management Reporting System- Senior management wanted to know financial information on a daily
basis. Two programmers have been working on a system to compile the data in a format they can use.
They plan to extract information from Accurate Financials when it is ready but for now have focused on
the current system. They will be done in two months.
Mobile Marketing App- The marketing manager asked for an app that sales staff could use to show
potential customers information. This would include things like fleet photos and specifications; pictures
of the six terminals and information about the distribution services UDC can provide; and a comparison
of their costs using sample shipments with rates from competitors compared to UDC costs. A
programmer and the web designer are working on the project. It will take two more months to
complete.
The current design and development process is best described by the way it worked in the selection and
integration of Accurate Financials. The CFO asked the (former) CIO to develop a new finance and
accounting system. The CIO interviewed large, respected companies and, after comparing their
capability to the current system, chose Accurate Financials. Two programmers were assigned and an
6/24/2016 5
Accurate Financials specialist was hired to work between IT and the finance office. The CIO receives
progress reports every two weeks.
Situation
When Carol was hired she toured each terminal to see the IT setup and understand local business
operations. It was important to her to know just how each person used the systems. She spent time with
bookkeepers and accountants, dispatchers, drivers and terminal management. Since she came from one
of UDC’s customers she knew that customers could offer insight into business improvements that would
be good for both companies. She visited one large customer in each of the terminal’s area of service to
get feedback on how operations between them and UDC could be improved. Her goal was to see how
she could translate what she learned into systems improvements.
Interestingly the most complaints came from bookkeepers and accountants. They said the system was
slow and data entry was tedious because accuracy was very important. If they entered wrong
information, it could cause incorrect billing (rates are based on weight and size), improper loading (the
wrong zip code could mean sending freight in the wrong direction unless a dispatcher caught the error),
and more. They estimated current accuracy at about 95% but they had no way of knowing for sure.
Further, they complained about financial reporting and their ability to meet compliance requirements.
Reporting was mostly a manual process and data they needed from the system was not easily accessed.
Most of them had resorted to keeping small ledgers at their desk to track information they knew they
would need for reporting.
The dispatchers explained that routing wasn’t all that hard, just time consuming. The routing system
grouped all of the shipments by zip code. They would take all of the shipments in a zip code and look at
the weight and size (how much cubic space each one needed in a truck), plot them on a map and then
put them in delivery sequence. They thought most trucks left the loading dock full and that that the
drivers made adjustments in delivery sequence when needed. Pickups were a bit more challenging.
Sometimes they sent a truck out just to pick up freight and bring it back to the terminal. Other times
they contacted a driver to ask them to stop at a customer to pick up a shipment while they were making
deliveries. Since they didn’t know exactly how much space was available on the truck this was a hit or
miss situation. Drivers were left to decide if they could make it work.
Drivers were the most outspoken, probably because no one ever asked for their opinion. They were also
the happiest of employees (this might explain why they were non-union). They liked being able to make
decisions on the go and they knew the customers very well. In fact they could call some of them if they
were running late and the customer would stay open so they could deliver or pick up a shipment. They
seemed to have favorite customers and often spent extra time with them talking about common
interests. Generally they were good ambassadors for the company.
Terminal managers were under constant pressure. Their main goal was to get shipments into and out of
the terminal as quickly as possible. Delivery times were measured and part of their performance plan.
They knew the company had established three new strategies because they were explained in an email
they just got. Carol asked how they might provide warehousing services. Most felt they had extra space
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and could take on some storage but keeping track of the shipments might be a problem. They had to do
this manually and the bookkeepers were the ones to keep the records. They felt more bookkeepers
would be needed but they didn’t know how many.
Carol also met with the maintenance and safety staff at the Washington terminal. The maintenance
folks had a large workload and complained that they had a hard time getting equipment in the shop for
preventative work. They did not know when equipment would be available until the last minute so
scheduling was always a scramble because they needed to make sure mechanics were available to do
the work. They had a lot of complaints about shifting work hours and the effect it had on their personal
lives.
The safety manager expressed concerns over driver hours of service. There are federal regulations that
limit drivers to 10 hours of driving at a time. Then they need to take an 8 hour break. The problem was
tracking the driver’s hours to make sure they stayed within the law. Dispatchers tried to help with this
when they scheduled pickups and deliveries but there was no easy way to do it and the results were
often based on best guess. The safety manager who was ultimately responsible for compliance had
drivers turn in their hours each day but this was always after the fact.
Carol’s customer visits were eye-opening. Most of the customers had automated inventory systems and
could easily track products from raw material to finished goods. They knew exactly what they would ship
and when, usually several days ahead of time. Some customers however needed near instantaneous
shipping. They wanted same-day pickup in a lot of cases and fast delivery. In most cases they were all
able to produce electronic documents such as the bill of lading and email or FAX it to UDC.
During her interview for the CIO position, Carol was told that the previous IT Director had left a good
foundation and that the staff seemed sufficient in number and appeared to be very capable. However,
since UDC is developing its strategies for the future, the staff must be able to support the business
strategies as well as the IT strategies that Carol would develop. One of the first things Carol did was to
interview each member of her staff. She discovered that the roles and responsibilities tended to overlap
and that morale among her staff was very low. Carol also interviewed the senior leadership of UDC and
learned that her staff was not meeting their expectations for service. The help desk was perceived as
being only somewhat competent and took much too long to respond to problems. Application
developers were very slow in delivering systems, and when the systems were finally delivered, they did
not reflect what the customers needed or wanted. Network outages occurred too often from the users’
perspective. Finally, the Chief Financial Officer told Carol that the IT costs need to be reduced.
Carol knew she had many challenges. She was determined to identify essential projects and then
prioritize them for management review. The outcomes would affect almost every aspect of the
business. Her IT portfolio was about to grow and her organization will need to change to meet the
challenges.

 
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Posted by on November 23, 2016 in academic writing, Uncategorized

 

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